New Interest in Empowering States to Tax Remote Sales

Under the Supreme Court’s 1992 decision in Quill v. North Dakota, a retailer is not required to collect sales taxes or use-taxes on sales to residents of a state in which the retailer has no “physical presence.” With the explosion in internet commerce since Quill was issued, states have faced significant losses from tax revenue. In response, states have enacted “click-through nexus” legislation and other bills that push the limits of Quill.

In a recent decision concerning a procedural tax issue, Supreme Court Justice Anthony Kennedy – who provided a key vote in favor of Quill – suggested that states should “find an appropriate case” to allow the federal courts to reconsider Quill.

States and state commentators have responded in a variety of ways. The acting Connecticut Commissioner of Revenue Services argued that Quill’s physical-presence standard is an “outdated artifact.” He suggested that states should begin “pushing the envelope of economic nexus.” At least two proposals are currently circulating in the House: the Marketplace Fairness Act (a version of which was passed by the Senate in 2013) and the Remote Transactions Parity Act.

Closely following each state’s pronouncements will allow your business to react to legislative or administrative changes that can affect tax obligations. As interest in the issue rises, it is increasingly important to follow the proposals coming from Washington, so your business is ready to mobilize lobbyists for or against a legislative proposal and/or implement any changes that Congress enacts.